5 Smart Tax Saving Investment Plans for AY 2020-21

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“People don’t have the slightest idea how much they have to be thankful
foruntil they have to pay taxes on it.”

While this quoteaims tomake your tax planning a bit less taxing, the
truth is that taxes can get you feeling blue.Tax-paying is an obligation that
every citizen must abide by. But you need not quail. While you may have a brief
idea about commonly known investment options, the good news is that by taking
advantage of permissible exemptions, rebates, deductions; you can reduce your
tax burden.

For this purpose, there is a wide range of tax-saving investments in India, allowingyou to save
taxunder the Income Tax Act, 1961. Which means, you can easily reduce your
tax-liability for AY 2020-21 by investing in some of the best
investment plans for tax-saving.

To help you invest wisely, therefore, we have given below a list ofbest
investment plansin India.

Term Insurance

Term
insurance is a significant part of
planning for the future of your loved ones, especially if they rely on your
income. Althoughdeath is grim to think about and no one likes to plan for the
same, the fact is that a little distress now can save your dear ones a world of
financial stress should the worst happen.

Term insurance is designed to protect your dear ones against unforeseen
circumstances after you are no more. In such an event, it offers a lump sum
death benefit to your nominees, which allows them to take care of their needs
and goals.

And if you are looking for a tax-saving investment plan, then term
insurance perfectly fits the puzzle. It offers the following tax benefits:

• Premiums paid are
tax deductible u/s 80C up to a maximum of 1.5 lakhs in a financial
year

• Death benefits are
tax-free

Unit-linked Insurance Plan (ULIP)

New-age ULIPs with better transparency and reduced charges have
successfully made themselves a must-have financial product in any investment
portfolio.This unique investment product offers the dual benefits of investment,
along with insurance. Meaning, it not only offers you the opportunity to
generate higher returns but also provides you with a life cover to safeguard the
financial future of your dear ones.

ULIPs allow you to invest in funds of your choice (debt, equity, and
balanced funds) and offers flexibility to switch between funds as per the
changing market. Moreover, reputable insurers like Max Life Insurance allow free
switching between funds along with the flexibility to choose premium payment
term, policy term, and sum assured multiples.

ULIPs not only help you make the most of the potential of the equity
markets but also offer tax benefits at the time of investment and maturity.

• Tax benefit on
investment: A maximum of Rs. 1.5 lakhs is allowed as deduction under section 80C
for the premium paid towards the ULIP plan

• Tax benefit on
maturity/partial withdrawal: Under section 10(10D), the amount received on
maturity or partial withdrawal is exempt from tax

Equity-linked Saving Scheme (ELSS)

This open-ended equity mutual fund, popularly known as ELSS, not only
allows you to grow your money but also helps you save tax. This is possible
because ELSS funds qualify for tax exemptions u/s 80C of the Indian IT Act.

When you invest in an equity-linked saving scheme, you can claim up to
Rs. 1.5 lakhs as a deduction from your taxable income in a financial year.

Moreover, you can invest in ELSS as per your convenience by choosing
from lump sum or SIP mode of investment.

Public Provident Fund (PPF)

PPF is a popular investment option backed by the Indian Government.
This long-term investment option offers safety, attractive interest rate (7.9%)
and facilities such as withdrawal, account extension, and loan.

When it comes to tax saving, contributions made towards PPF are
eligible for tax deductions u/s 80C, and the deduction limit is Rs.1.5 lakhs. In
addition, the interests earned is tax-free, and no wealth tax is applicable on
this investment.

National Pension System (NPS)

NPS is a long-term and voluntary investment plan for retirement under
the scope of PFRDA (Pension
Fund Regulatory and Development Authority) and the Central
Government. PPFis a good scheme for investors having a low-risk appetite and for
those who want to plan for their retirement. Tax benefits under NPS are as
follows:

• NPS subscribers can
claim tax deduction u/s 80C up to 10% of gross income with the overall cap of
Rs. 1.5 lakhs

• An additional
deduction up to Rs. 50,000 (which is over and above the deduction of Rs. 1.5
lakh )is available under subsection 80CCD (1B)

Now that you know about these tax saving investments in India, invest
in one as per your needs and goals to reduce your tax liability in AY 2020-21.